How to Use a Reverse CAGR Calculator

How to Use a Reverse CAGR Calculator

A reverse CAGR calculation works backward from a target: given the value you want to reach, the number of years, and an expected annual growth rate, it tells you how much you need to invest today. The formula is Starting amount = Target value ÷ (1 + CAGR)^years. For example, to reach $100,000 in 10 years at 7% a year, you need $100,000 ÷ 1.07^10, or about $50,835 today.

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IntroductionHistorical DataOptions DataUse-cases

What is reverse CAGR?

Reverse CAGR uses the compound annual growth rate formula in the opposite direction. The standard CAGR formula finds the growth rate from a start and end value:

CAGR = (Ending value ÷ Beginning value)^(1 ÷ years) − 1

Reverse CAGR rearranges it to find the missing starting amount, or, if you know both amounts, the growth rate you would need to reach your goal.

How to calculate reverse CAGR in Excel

1. Starting amount needed: =Target/(1+Rate)^Years, for example =100000/(1+7%)^10 returns about 50,835.
2. Required growth rate: =(Target/Start)^(1/Years)-1, for example =(100000/50000)^(1/10)-1 returns about 7.2%.
3. Future value check: =Start*(1+Rate)^Years confirms the result.

Excel's built-in PV and RATE functions give the same answers: =PV(7%,10,0,-100000) returns the starting amount, and =RATE(10,0,-50000,100000) returns the required rate.

How to use the result

Use the starting amount to decide how much to invest now, or use the required rate to judge whether a goal is realistic for the investments you plan to hold. CAGR assumes smooth compounding; real returns vary year to year, so treat the result as a planning estimate, not a promise.

Conclusion

Reverse CAGR answers two planning questions: how much to invest today to reach a target, and what growth rate a target requires. Both are one-line Excel formulas. To track the actual growth of your investments against the plan, MarketXLS returns historical prices in Excel, for example =Close_Historical("SPY", DATE(2016,1,4)). This article is educational and not investment advice.

Browse MarketXLS templates for more investment calculators.